Apache Corp. (APA), the third-worst performer this year among a group of U.S. oil and natural gas producers, agreed to sell wells and acreage in the shallow waters of the Gulf of Mexico to private-equity firm Riverstone Holdings LLC for $3.75 billion in cash.
The sale to Riverstone’s Fieldwood Energy includes 1.9 million net acres with estimated reserves of 133 million barrels of oil and liquids and 636 billion cubic feet of gas, the Houston-based oil company said today in a statement. In addition to the cash, Riverstone will assume about $1.5 billion in future costs associated with shutting the wells. Apache will keep a 50 percent stake in certain blocks for future exploration.
In May, Apache doubled the amount of assets it planned to sell this year to $4 billion, saying it would use $2 billion to reduce debt and other proceeds to buy back as many as 30 million shares. Chairman and Chief Executive Officer Steve Farris said in a March interview that everything was up for review as Apache began to streamline operations after a $16 billion acquisition spree that began in 2010 and ended last year.
“This transaction is an important step toward rebalancing our portfolio,” Farris said in today’s statement. “At the end of this process, we expect Apache to have the right mix of assets to generate strong returns, drive more predictable production growth, and create shareholder value.”
The sale is projected to close on Sept. 30 with an effective date of July 1, Apache said. Fieldwood agreed to offer work to “substantially all” of Apache’s shelf employees.
Daily output from the assets is the equivalent of more than 95,000 barrels of oil, Fieldwood said.
The sale is probably a good deal for Apache, as it takes the company almost to its $4 billion proceeds target, said James Sullivan, an analyst with Alembic Global Advisors in New York who has a neutral rating on Apache shares and owns none. The company may look to sell deep-water Gulf holdings and part of its operations in Egypt to put a valuation on that portfolio, he said.
Depending on what is sold, deep Gulf properties may fetch an estimated $1.5 billion to $2.5 billion, Sullivan said.
“Now they can afford to be a little more picky in terms of pricing,” Sullivan said in a phone interview today.
Riverstone was founded in 2000 and has about $25 billion of equity capital raised across seven investment funds, according to a statement today. It has invested in such entities as Magellan Midstream Partners LP and Coastal Carolina Clean Power LLC, according to its website.
Apache is the third-worst performer in 2013 on the Standard & Poor’s 500 Oil & Gas Exploration & Production Index, beating only QEP Resources Inc. and Newfield Exploration Co.
The announcement was released after the close of trading in New York, where Apache rose about 2 percent to $85.25 at 5:11 p.m. As of the close, the shares had increased 6.5 percent this year.
Apache was advised by Goldman Sachs Group Inc. and law firm Bracewell & Giuliani LLP. Vinson & Elkins LLP and Simpson Thacher & Bartlett LLP were legal advisers to Fieldwood.
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